Walmart’s Ancestor

Though it went mostly unnoticed, A&P, the once-ubiquitous grocery chain, filed for bankruptcy last year. Other than residents of the East Coast—where several hundred stores remain in operation—many Americans have likely never set foot in one of the chain‘s
supermarkets. Today the company is more than $3 billion in debt and long-since overcome by competitors. But there was a time, less than a century ago, when A&P was one of the largest retailers in the U.S., with stores from coast to coast and a trailblazing business model that overwhelmed independent rivals and even earned the enmity of the federal government.

The A&P story, an economic soap opera with contemporary resonance, is compellingly told by Marc Levinson in The Great A&P and the Struggle for Small Business in America. Half history, half economics lesson, the book serves as a useful reminder of the economic power of “creative destruction,” the occasionally ignored fact that capitalism and competition don’t always go hand in hand, and the complexity behind our often simplistic image of “mom and pop” operations and their giant nemeses.

Originally called the Great American Tea Company, A&P was the creation of George Gilman, an ambitious Manhattan merchant with a knack for flamboyant promotion. Gilman’s promotional stunts—they included enticing customers by placing an aromatic coffee roaster at the busy intersection of Broadway and Bleecker—and the-then novel concept of branding products and extending inventory beyond tea and coffee distinguished the company from its countless competitors after the Civil War. At Gilman’s side while business blossomed was George H. Hartford, a bookkeeper and junior partner before taking control of the company, now named the Great Atlantic & Pacific Tea Company, in 1878. Hartford passed the company on to his sons George L. and John in 1917.

Under the leadership of the younger Hartfords, A&P matured into America’s mightiest retailer. The duo—John served as the flashy promoter, George as the taciturn accountant—institutionalized practices commonplace today. They used size to win discounts from suppliers, kept prices low to increase sales volume, and cut out middlemen. The Hartfords turned the humble tea company into a powerhouse national grocery chain that sold a vast array of inexpensive products—meat, dairy, fresh produce, and baked goods—taken for granted today, but which were then rarely available in one location. The firm’s high-volume, low-price strategy, coupled with rigorous bookkeeping and aggressive but thrifty expansion—the Hartfords refused to rent space long-term for their stores, lest a franchise flop—plus a new emphasis on in-store aesthetics turned the company, in Levinson’s words, into a “profit machine.” In the process, A&P threatened smaller, independent grocery stores, which could not keep up.

Then, as now, many held a romantic notion of the mom-and-pop store. Small, family-run establishments, so the story went, offered exquisite products, generated jobs, and played a vital role in the social life of small communities. Millions of Americans living in rural areas viewed the success of national chains as a danger to their way of life. As Levinson chronicles, this sentiment found favor in statehouses, where numerous “chain-store” taxes were signed into law; in Congress, where populist Texas Representative Wright Patman, the self-appointed enemy of “the money barons of the East,” fought for legislation to protect independent merchants; and the White House, where the administrations of Franklin D. Roosevelt and Harry S. Truman sought to restrict the growth of A&P.

Readers will naturally draw parallels between the battles over A&P and more recent controversies surrounding Walmart, though opposition to the newer firm has been relatively tame compared with the decades-long bombardment its predecessor endured. In documenting this struggle, Levinson is sympathetic to the Hartfords, but his treatment is steeped in arithmetic rather than ideology. The benefits of chains such as A&P are considerable and often overlooked, he observes, and the rosy view of their independent rivals is not always accurate. Chains, with their lower prices and extended inventories, gave Americans greater access to food and improved nutrition—especially in urban areas, where many A&Ps were located.

Meanwhile, small grocery stores offered a limited array of products at high prices and low quality, often forcing consumers to travel to several different venues in order to check off all the items on their shopping lists. Small grocers provided employment for their clerks and others in the lengthy supply chain, but they produced minimal revenue and inspired even less innovation. Unsurprisingly, government policy, which was based on bad economics and ignored consumers, took little of this into account, propping up the archaic mom-and-pop business model.

The story culminates with a timeless reminder that capitalism and competition are by no means synonymous. Capitalists are not immune to behavior—creating monopolies or forming cartels, for instance— that crushes competition and ultimately harms consumers. But, as the A&P saga illustrates, regulators assigned with stopping these practices don’t always recognize the difference. By attempting to clip A&P and its ilk, the federal government was stifling genuine competition and harming consumers. Policymakers in Washington and in the states were, in Levinson’s words, “sheep in wolves clothing, pretending to be tough on big business to benefit the common man while in fact forcing the common man to pay more than necessary for his groceries in order to keep small businesses rolling in profit.” The Hartfords were indeed aggressive capitalists, but they had little interest in monopolizing markets, fixing prices, or forcing customers to buy products they didn’t want at prices they couldn’t afford.

After the Hartfords died, their company eventually fell victim to the same forces of creative destruction that had propelled it in the first place. Other, more innovative supermarket chains turned A&P, once the nations’ largest company behind General Motors, into a marginalized and insolvent regional chain. Readers of Levinson’s book will find it difficult not to agree that the Hartfords and their company brought benefits to countless Americans—and that their much-derided descendants, Walmart included, are doing the same today.